ReTo Eco-Solutions, Inc. Announces First Half 2023 Financial Results
BEIJING, Dec. 27, 2023 /PRNewswire/ -- ReTo Eco-Solutions, Inc. (NASDAQ:RETO) (the "Company"), a provider of technology solutions and operation services for intelligent ecological environments and internet of things technology development services in China and other countries, today announced its financial results for the six months ended June 30, 2023.
First Half 2023 Financial Review
- Revenues decreased by approximately $1.7 million, or 57%, to $1.2 million for the six months ended June 30, 2023 from approximately $2.9 million for the six months ended June 30, 2022.
- Cost of revenues decreased by approximately $1.4 million, or 55%, to approximately $1.1 million for the six months ended June 30, 2023 from $2.5 million for the six months ended June 30, 2022.
- Operating expenses increased by approximately $35.1 million, or 582%, to approximately $41.1 million for the six months ended June 30, 2023 from $6.0 million for the six months ended June 30, 2022.
- Net loss increased by approximately $39.9 million, or 692%, to approximately $45.7 million for the six months ended June 30, 2023 from $5.8 million for the six months ended June 30, 2022.
Financial Results for the First Half 2023
Revenues
Revenues decreased by approximately $1.7 million, or 57%, to $1.2 million for the six months ended June 30, 2023 from approximately $2.9 million for the six months ended June 30, 2022. Revenue from machinery and equipment sales decreased by approximately $1.0 million, or 49%, to $1.0 million for the six months ended June 30, 2023 from approximately $2.0 million for the six months ended June 30, 2022. The decrease is mainly due to slowdown of the construction industry and less demand for the Company's products. Sales of the Company's environmental-friendly construction materials decreased by approximately $0.2 million, or 72%, to approximately $0.09 million for six months ended June 30, 2023 from approximately $0.3 million for the six months ended June 30, 2022 due to the decrease in demand resulting from the downturn of the national real estate market. Revenue from other services decreased by approximately $0.3 million, or 79%, to approximately $0.09 million for six months ended June 30, 2023 from approximately $0.4 million for the six months ended June 30, 2022 due to less demand for the Company's technological consulting service and roadside assistance service.
Cost of revenues
Cost of revenues decreased by approximately $1.4 million, or 55%, to approximately $1.1 million for the six months ended June 30, 2023 from $2.5 million for the six months ended June 30, 2022. The decrease in cost of revenues was in line with the decrease in revenues.
Gross profit
Gross profit decreased by approximately $0.3 million, or 75%, to approximately $0.1 million for the six months ended June 30, 2023 from $0.4 million for the six months ended June 30, 2022. Gross margin was 8% for the six months ended June 30, 2023 as compared to 13% for the six months ended June 30, 2022. The decrease in gross profit was primarily attributable to (i) a decrease of approximately $147,000 in gross profit in machinery and equipment business due to the significant decrease in domestic and overseas market demand of machinery and equipment; and (ii) a decrease of approximately $155,000 in gross profit in other services due to decreased customer orders. Because other services with higher gross profit margin accounted for 7% of total revenue in the six months ended June 30, 2023 as compared to 15% of total revenue for the six months ended June 30, 2022, the Company's gross profit margin decreased to 8% for the six months ended June 30, 2023 as compared to 13% of total revenue for the six months ended June 30, 2022.
Operating expenses
For the six months ended June 30, 2023 and 2022, the Company's selling expenses were approximately $0.3 million for both periods.
General and administrative expenses increased by $33.7 million, or 572%, to $39.6 million for the six months ended June 30, 2023 from $5.9 million for the six months ended June 30, 2022. The increase was due to $33.8 million increase in share-based compensation, partially offset by decreased payroll expenses.
Bad debt expenses amounted to approximately $0.5 million for the six months ended June 30, 2023, as compared to a bad debt recovery of approximately $0.7 million for the six months ended June 30, 2022.
Research and development expenses increased by $0.3 million, or 60%, to $0.8 million for the six months ended June 30, 2023 from $0.5 million for the six months ended June 30, 2022. The increase was due to an increase of approximately $0.3 million in expert fees.
Interest expense
The Company's interest expenses were approximately $0.2 million for both six-month periods ended June 30, 2023 and 2022.
Change in fair value in convertible debt
Due to change in fair value of convertible loans, the Company recorded an unrealized loss of $57,985 and $204,331 in other expense for the six months ended June 30, 2023 and 2022, respectively.
Other income (expense), net
Other expense was $4.4 million for the six months ended June 30, 2023 as compared to $0.3 million for the six months ended June 30, 2022. The increase was due to a one-time charge of $4.7 million from a terminated project.
Loss before income taxes
The Company's loss before income taxes was approximately $45.7 million for the six months ended June 30, 2023, an increase of approximately $39.9 million as compared to loss before income taxes of approximately $5.8 million for the six months ended June 30, 2022. The increase was primarily attributable to decrease in revenue and increase in operating expenses and other expense.
Provision for income taxes
The Company's subsidiaries in the People's Republic of China ("PRC") are subject to PRC income tax, which is computed according to the relevant laws and regulations in the PRC. Under the Enterprise Income Tax Law, the corporate income tax rate applicable to all companies, including both domestic and foreign-invested companies, is 25%. However, two subsidiaries of the Company, Beijing REIT Technology Development Co., Ltd. and Hainan Yile IoT Technology Co., Ltd., are recognized as High and New Technology Enterprises by the PRC government and thus subject to a favorable income tax rate of 15%. As the Company had losses before income tax, its income tax expenses amounted to $52 and $28,767 for the six months ended June 30, 2023 and 2022, respectively.
Net loss
As a result of the foregoing, net loss amounted to approximately $45.7 million and $5.8 million for the six months ended June 30, 2023 and 2022, respectively.
Cash
Cash was approximately $0.2 million as of June 30, 2023, reflecting an increase of approximately $0.1 million from approximately $0.1 million as of December 31, 2022.
About ReTo Eco-Solutions, Inc.
Founded in 1999, ReTo Eco-Solutions, Inc., through its proprietary technologies, systems and solutions, is striving to bring clean water and fertile soil to communities worldwide. The Company, through its operating subsidiaries in China, is engaged in the ecological restoration and solid waste treatment, manufacturing and distribution of eco-friendly construction materials (aggregates, bricks, pavers and tiles) made from mining waste (iron tailings), and soil remediation materials transformed from solid waste (iron tailings), as well as equipment used for the production of these eco-friendly construction materials and soil remediation materials. In addition, the Company provides consultation, design, project implementation and construction of urban ecological protection projects and parts, engineering support, consulting, technical advice and service, and other project-related solutions for its manufacturing equipment and environmental protection projects. The Company also offers roadside assistance services and technology development services utilizing Internet of Things technologies. For more information, please visit: http://en.retoeco.com.
Forward-Looking Statements
This press release contains forward-looking statements. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements include, among others, statements regarding the Company's plans to regain compliance with the minimum bid price requirement. The Company's actual results may differ materially from those expressed in any forward-looking statements as a result of various factors and uncertainties. The reports filed by the Company with the Securities and Exchange Commission discuss these and other important factors and risks that may affect the Company's business, results of operations and financial conditions. For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.
For more information, please contact:
ReTo Eco-Solutions, Inc.
Angela Hu
Tel: +86-010-64827328
Email: [email protected] or [email protected]
RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES | ||||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
June 30, | December 31, | |||||||
2023 | 2022 | |||||||
ASSETS | (Unaudited) | |||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 233,839 | $ | 113,895 | ||||
Accounts receivable, net | 475,303 | 2,150,450 | ||||||
Accounts receivable, net - related party | 79,639 | 83,736 | ||||||
Advances to suppliers, net | 707,775 | 453,894 | ||||||
Advances to suppliers, net - related party | 1,598,977 | 3,787,036 | ||||||
Inventories, net | 820,590 | 337,798 | ||||||
Prepayments and other current assets | 114,287 | 402,151 | ||||||
Due from related parties | 483,369 | 208,225 | ||||||
Due from third parties | 678,223 | - | ||||||
Total Current Assets | 5,192,002 | 7,537,185 | ||||||
Property, plant and equipment, net | 8,028,957 | 8,722,435 | ||||||
Intangible assets, net | 4,548,402 | 4,869,654 | ||||||
Long-term investment in equity investee | 2,301,850 | 2,503,944 | ||||||
Right-of-use assets | 271,972 | 424,999 | ||||||
Total Assets | $ | 20,343,183 | $ | 24,058,217 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current Liabilities: | ||||||||
Short-term loans | $ | 5,274,916 | 1,319,490 | |||||
Convertible debt | 3,004,000 | 3,922,686 | ||||||
Advances from customers | 2,072,983 | 2,551,216 | ||||||
Advances from customers-related party | 166,275 | - | ||||||
Due to a minority shareholder | 413,719 | 725,000 | ||||||
Deferred grants - current | 264 | 18,563 | ||||||
Accounts payable | 2,934,058 | 2,624,701 | ||||||
Accrued and other liabilities | 2,433,692 | 2,717,432 | ||||||
Loans from third parties | 1,356,113 | 1,106,233 | ||||||
Taxes payable | 1,922,345 | 2,077,088 | ||||||
Operating lease liabilities, current | 150,420 | 277,036 | ||||||
Deferred tax liability | 309,664 | 325,593 | ||||||
Total Current Liabilities | 20,038,449 | 17,665,038 | ||||||
Loans from third parties-noncurrent | 1,048,088 | 1,160,000 | ||||||
Operating lease liabilities - noncurrent | 83,407 | 158,650 | ||||||
Total Liabilities | 21,169,944 | 18,983,688 | ||||||
Commitments and Contingencies | ||||||||
Shareholders' Equity: | ||||||||
Common Share, $0.01 par value, 20,000,000 shares authorized, 7,725,848 | 77,259 | 43,400 | ||||||
Additional paid-in capital | 98,689,295 | 53,331,093 | ||||||
Subscription receivable | (5,887,546) | - | ||||||
Statutory reserve | 1,069,882 | 1,066,554 | ||||||
Accumulated deficit | (93,056,277) | (47,813,206) | ||||||
Accumulated other comprehensive loss | (2,220,029) | (2,388,890) | ||||||
Total Shareholders' Equity Attributable to ReTo Eco-Solutions Inc. | (1,327,416) | 4,238,951 | ||||||
Noncontrolling interest | 500,655 | 835,578 | ||||||
Total Shareholders' Equity | (826,761) | 5,074,529 | ||||||
Total Liabilities and Shareholders' Equity | $ | 20,343,183 | 24,058,217 | |||||
RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES | ||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE | ||||||||
For the Six Months Ended June 30, | ||||||||
2023 | 2022 | |||||||
Revenues – third party customers | $ | 1,022,919 | $ | 2,882,792 | ||||
Revenues – related parties | 210,864 | 6,987 | ||||||
Total revenues | 1,233,783 | 2,889,779 | ||||||
Cost of revenues – third party customers | 780,794 | 1,957,829 | ||||||
Cost of revenues – related parties | 359,398 | 557,145 | ||||||
Total Cost | 1,140,192 | 2,514,974 | ||||||
Gross Profit | 93,591 | 374,805 | ||||||
Operating Expenses: | ||||||||
Selling expenses | 289,730 | 288,552 | ||||||
General and administrative expenses | 39,559,187 | 5,888,849 | ||||||
Bad debt expenses (recovery) | 460,116 | (650,776) | ||||||
Research and development expenses | 809,979 | 505,847 | ||||||
Total Operating Expenses | 41,119,012 | 6,032,472 | ||||||
Loss from Operations | (41,025,421) | (5,657,667) | ||||||
Other Income (expenses): | ||||||||
Interest expenses | (180,772) | (189,755) | ||||||
Interest income | 1,509 | 2,293 | ||||||
Other income (expenses), net | (4,356,224) | 348,266 | ||||||
Change in fair value of convertible debt | (57,985) | (204,331) | ||||||
Gain from disposal of subsidiaries | 38,394 | - | ||||||
Share of losses in equity method investments | (83,307) | (38,885) | ||||||
Total Other Expenses, Net | (4,638,385) | (82,412) | ||||||
Loss Before Income Taxes | (45,663,806) | (5,740,079) | ||||||
Provision for Income Taxes | 52 | 28,767 | ||||||
Net Loss | (45,663,858) | (5,768,846) | ||||||
Less: net loss attributable to noncontrolling interest | (424,115) | (92,866) | ||||||
Net Loss Attributable to ReTo Eco-Solutions, Inc. | $ | (45,239,743) | $ | (5,675,980) | ||||
Net Loss | $ | (45,663,858) | $ | (5,768,846) | ||||
Other comprehensive gain (loss): | ||||||||
Foreign currency translation adjustment | 258,053 | (723,421) | ||||||
Comprehensive Loss | (45,405,805) | (6,492,267) | ||||||
Less: comprehensive loss attributable to noncontrolling interest | (334,923) | (22,981) | ||||||
Comprehensive Loss Attributable to ReTo Eco-Solutions, Inc | $ | (45,070,882) | $ | (6,469,286) | ||||
Loss Per Share | ||||||||
Basic and diluted | $ | (8.32) | $ | (1.65) | ||||
Weighted Average Number of Shares | ||||||||
Basic and diluted | 5,437,853 | 3,443,338 | ||||||
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SOURCE ReTo Eco-Solutions, Inc.